Tepid demand for copper

Continuing a trend that began in the fourth quarter of 2017, copper scrap dealers are seeing extended delivery dates from their domestic consumers as supply outpaces demand. This situation, as well as softer export buying, is contributing to the wider spreads recyclers are reporting.

Moving, though slowly

The nonferrous marketing manager for a scrap processing company based in the Midwest says that while U.S. copper scrap generation varies by grade, it has been increasing generally.

“Higher terminal market pricing in conjunction with China backing away from the copper market has certainly increased domestic supply on the copper commodities,” he says.

Generation from the demolition and construction sectors is stronger than the marketing manager has seen in the past few years. “Capital investments being made by domestic manufacturing companies to replace and upgrade older equipment are generating increased scrap. The material pickup is seen across the board, from increasing scrapped out CNC (computer numerical control) machines to entire plant demolitions,” he says.

The chief operating officer for a scrap processing company based in the Northeast says obsolete generation is about where he would expect to see it in the Southeast region, which is where he is based. “It is probably a little bit above where we would be traditionally.”

He attributes the increase in obsolete supply to the upward trend in COMEX pricing for copper, which he says is spurring more interest in the metal.

ISRI, citing American Metal Market data, states “the discount on No. 2 copper scrap delivered to U.S. refineries stood at around 42-43 cents per pound in early December 2017. In comparison, the spread on No. 2 copper scrap was around 17-19 cents in June 2016.”

The association also mentions that “scrap market participants are questioning whether terminal market copper prices reflect physical market fundamentals or speculation,” which has been fueled in part by China’s clampdown on scrap imports and expectations that its consumption of copper cathode and other forms of refined copper will increase as a result.

A broker based in the Midwest also points to steady generation of obsolete material. However, he adds that “you can’t match it up” on the demand side. “No. 1 copper is hard to find, but I have demand for it, while bare bright is everywhere, but I can’t get mills to take it.”

He adds that “chops are everywhere” and that the domestic market has been unable to keep up in terms of demand.

More generally speaking, the source in the Southeast says, “Demand is good, but supply must be better than demand.”

Delivery appointments for copper scrap have not been readily available, he says, though—at three weeks to 30 days—they are not as far out as they were in the fall.

“Otherwise,” he says, “higher copper markets have caused an increased amount of supply to enter the market, thus driving pricing down. But we believe the wider spreads to be a result of increased supply amid steady demand.”

The marketing manager continues, “We believe that commodities like bare bright will see demand pick up as the Chinese consumers are forced to compete or pay up for cathode or equivalently clean copper units.”

As of mid-January, the broker characterizes demand from domestic consumers as being lower, adding that consuming facilities are not running at 100 percent. “They are generating enough return scrap to get what they need,” he says.

It is common to see a seasonal depression in copper scrap demand going into the end of the calendar year, says the nonferrous marketing manager. “Although we did not see much of a pickup in January, indications are that demand will pick up in February and remain strong through the spring and summer.”

He adds, “Consuming facilities are reporting lower than anticipated sales for finished goods at the moment, but order books appear to be quickly improving.”

The export picture

Export buying activity has been mixed, the marketing manager says. “Understandably, our Chinese customers have been unable to purchase the same materials they had been over the past several years, but other consumers have emerged.

“In recognition of the transition that is occurring from Chinese consumers moving to other countries, the Indians have been aggressively attempting to gain market share,” the marketing manager adds.

According to AMM, the Chinese government has issued the first two rounds of solid waste import licenses for 2018, and copper scrap import license numbers and tonnages are down by more than 94 percent each.

The marketing manager says these reductions are a “temporary inconvenience.” He adds, “China has taught the rest of the developing world a valuable lesson as it pertains to acquiring affordable raw materials through the leveraging of their labor markets. We are already seeing several customers moving operations to other countries where there is a high demand for materials and low costs of labor.”

As a result, the marketing manager says, “We are still moving many of the commodities that we had been, just delivering to different ports.”

When asked if his company has made any adjustments to its operations in response to China’s harder line on scrap imports, he says, “Any changes that we have made are simply to process materials further as opposed to selling as-is.”

He adds that this decision is driven by economic considerations. “If a market for material in one form disappears, we will process the material further until we have a saleable commodity yielding the highest margin available.”

The source based in the Southeast says his company has been shipping very little material to China, though he adds that it did send a load of motors there as well as one load of birch/cliff in January.

Transportation woes

In addition to the widening spreads recyclers are dealing with, rising transportation costs associated with the shortage of trucks and drivers are eating into the margins of copper scrap dealers.

“The shortage is certainly being seen on the pricing being offered by transportation companies,” the marketing manager says. “As of now, we are paying considerably more to move material, but have not ultimately had many issues securing transportation if you are willing to pay the going rate.”

The source based in the Southeast says the higher prices and tightness in the trucking sector have only gotten worse since the initial disruptions caused by the hurricanes in Texas and Florida. He points to regulations requiring drivers to electronically log their hours that went into effect in mid-December of 2017 as the primary reason. He says his company is double-booking trucks just to be sure it gets service.

“It’s not a bad thing,” he says of the new requirements, “but it will take a while for the market to adjust.”

The Midwest-based broker also blames the hours-of-service regulations for the tightness in the trucking market and the rising prices. He says he’s seen trucking rates double. “It is going to turn into instant inflation because products are going to start costing more,” the broker says.

Despite the challenges currently facing copper scrap dealers, the marketing manager based in the Midwest remains “cautiously optimistic.” He says, “We believe that we will see a higher average price for the red metals as compared to 2017; however, domestic mill demand remains in question. If order books continue to build, and the Chinese economy remains strong, then we believe that we will see spreads come in considerably.”

An extended version of this article, with additional information, appears in the February 2018 print edition of Recycling Today, and can be viewed online here.

HBI facility receives permit from Ohio EPA

The Ohio Environmental Protection Agency (EPA) has issued a final air emissions permit-to-install to IronUnits LLC, which will allow the company to build an iron briquette manufacturing facility in Toledo, Ohio. When operational, the facility will be capable of producing nearly 2.5 million tons per year of hot briquetted iron (HBI) using a gas-based direct reduction process supplied by Charlotte, North Carolina-based Midrex Technologies.

IronUnits is a subsidiary of Cleveland-Cliffs Inc., a steel industry raw materials supplier based in Cleveland.

The permits include conditions limiting the total maximum air emissions, including carbon monoxide, nitrogen oxides, particulate matter and greenhouse gas pollutants.

The decision to issue the permit followed the Ohio EPA and the Toledo Division of Environmental Services conducting a public meeting about the project in January 2017. Public comments received during the open meeting and during the public comment period were reviewed and considered before a final decision was made, according to the Ohio EPA.

Permits from Ohio EPA’s Division of Surface Water also are needed before the company can begin physical construction of the facility.

The company hopes to break ground on the facility by May 2018 with commercial operations starting around the middle of 2020. The facility will use taconite pellets as a raw material.

Chiho outfits Hong Kong processing plant

Hong Kong-based Chiho Environmental Group Ltd. has installed equipment it will start operating in 2018 to process several types of waste electrical and electronic equipment (WEEE), including wire and cable scrap.

The scrap recycling firm is installing two processing lines outfitted with equipment made by Denmark-based Eldan Recycling. One line will focus on processing wire and cable scrap while the other has been designed to shred a wider variety of WEEE items before harvesting marketable scrap metals and plastics from the shredded material created.

Chiho has grown via acquisition this decade and now operates scrap recycling facilities under the Scholz brand in Europe and as Liberty Iron & Metal in the United States and Mexico. Although Chiho, which also has processing facilities in Taizhou and Yantai, China, is based in Hong Kong, the new WEEE facility will be its first in that city.

The Hong Kong processing facility is located within three warehouses situated on a six-acre (24,000-square-meter) parcel of land in the Yuen Long Industrial Estate within Hong Kong’s New Territories.

Hong Kong’s government is supporting a WEEE collection system that will direct some types of obsolete electronics to a facility being operated by Germany’s ALBA Group. However, Chiho General Manager Kwok Chun Sing says ALBA is likely to receive “about 35 percent” of the 70,000 to 80,000 metric tons of WEEE generated in the HKSAR each year. “So, there is a market for other companies to operate,” states Kwok.

Veteran scrap trader Tom Bird, who joined Chiho as its chief operating officer in 2017, says the company’s ability to process material in Europe, North America, China and Hong Kong gives it “flexibility in terms of what we can buy and process,” providing Chiho with an advantage.

Kwok says the e-scrap processing experience that will be gained by Chiho in Hong Kong also could allow it to “play a bigger role in the domestic market” in mainland China. Adds Bird, “China’s domestic market is an opportunity, and Chiho is well placed to take advantage of that.”

“The Chinese government’s efforts to eliminate obsolete production facilities while implementing environmentally friendly policies had helped gradually reduce excess capacity in the industry during the year,” says Dr. Raymond Lee, chairman of Lee & Man Paper. “Demand recovering during the year also notably improved the demand and supply equilibrium in the industry,” he adds.

Lee continues, “Paper [costs have] increased as a result of the surge in energy, raw materials and transportation costs. The overall increase in sales revenue as well as the value-added tax refund policy enabled satisfactory growth in the group’s profit margin. Looking ahead, the group is optimistic about the outlook of the paper industry. As the rapid development of e-commerce and online shopping has fundamentally changed consumption and logistics models, [this] in turn has benefited the packaging [sector, which is] currently undergoing consolidation. Overall paper consumption still has considerable room for growth.”

Lee & Man’s tissue paper business now has a total annual production volume of 685,000 tons. That business unit has 10 tissue paper manufacturing machines with a total annual production volume of 465,000 tons in Chongqing in western China; a machine with 110,000 tons of annual output in Jiangxi Province in southeastern China; and a 110,000-tons-per-year machine in south China’s Guangdong Province.

The company indicates it has been able to reduce the production cost of tissue paper thanks to greater economies of scale from increased production volume and steady supply from its pulp production facilities in Chongqing. Another two production lines with a combined annual production capacity of 110,000 tons in the Chongqing Industrial Park will begin production in 2018, boosting Lee & Man’s annual tissue output to tissue paper is expected to reach 795,000 tons.

On the packaging side, Lee & Man states it continues to invest in its paper manufacturing operations in Vietnam, with an annual production capacity of 400,000 tons now in operation there. In 2017 another paper machine also came online in Jiangxi, China, meaning the company is now capable of producing more than 6 million tons of packaging paper and board per year.

“Adhering to its long-held prudent strategies and with debts maintained at a reasonable level, the group will monitor the pace of economic development in China and Southeast Asia, while continuing to bolster production capacity for packaging and tissue paper, as well as strengthen its presence in Vietnam,” remarks Edmond Lee, CEO of Lee & Man Paper.

“Management will also proceed with plans to enhance production efficiency, strictly control costs and strengthen capital operations to maintain its competitiveness in the paper industry,” he adds.

Plastics Recycling 2018: Committing to recycling and recycled content

Pictured above, from left: John Layman of P&G, who served as moderator; Pam Oksiuta of SC Johnson; Kelly Murosky of Seventh Generation; and Sarah Dearman of Coca-Cola

For recycling to be successful, brand owners must commit to designing products and packaging that are recyclable as well as to consuming recycled materials in the manufacturing of their products. Representatives from Seventh Generation, Coca-Cola and SC Johnson shared their commitments in these areas during one of the plenary sessions at Plastics Recycling 2018 titled Brand Owners Perspective on PCR.

While Ziploc bags and other plastic film can be recycled through store take-back programs, Pam Oksiuta, senior director of global sustainability at SC Johnson, Racine, Wisconsin, said, “We believe there is a better option than store take-back. It is not a very convenient option for consumers.”

To that end, SC Johnson has been studying the possibility of recovering plastic film, like its Ziploc bags, at material recovery facilities (MRFs) in the U.S., using the pellets created from recycling this material to manufacture plastic garbage bags in Europe.

Oksiuta said 3 billion pounds of plastic film are available for recovery, though only 4 percent of this material is recovered for recycling. The figure for Ziploc bags is even slighter: Only 0.2 percent of the bags are collected for recycling through in-store programs, she said. “We need to work together to find a solution.”

While Oksiuta said SC Johnson understands the issues recyclers face, she asserted that plastic film could be recovered at most material recovery facilities (MRFs), adding that the company’s experience with Materials Recovery for the Future (MRFF) has shown that optical scanners are capable of sorting single and multilayer films from the material stream.

“Test results continued to validate that MRF automated sorting is technically feasible,” the MRFF collaborative writes on its website. “Modeling results show costs to add flexible packaging recycling in large MRFs are within reason, particularly in regions with economic incentives that promote sustainable land use and end markets.”

Perceptions don’t align with this conclusion, Oksiuta said. “There can be a sizable end market for this material, but it is perceived as inefficient and unprofitable.”

She added that recycled film can be used in products ranging from pallets to outdoor furniture to decking to the previously mentioned garbage bags.

“We believe there is an opportunity here,” Oksiuta said. “This is not about selling garbage bags but to show there is an end market for this material and it can be a sustainable business.”

Seventh Generation has prioritized the use of recycled plastics in its packaging. (See “Committed to recycled content” in Plastics Recycling, a supplement to Recycling Today, for more on the company’s use of recycled content in its packaging.) Kelly Murosky, a senior packaging engineer with the company, which is based in Burlington, Vermont, said Seventh Generation’s 2020 packaging vision calls for it to eliminate the use of virgin plastics and to produce zero packaging waste.

“We are well aware of the waste that our packaging makes,” she said. “We keep this top of mind when designing packaging.”

The company has prioritized the use of PCR (postconsumer resin) because of the reduction in greenhouse gas emissions that can be realized by doing so, Murosky said. It also has incorporated the use of drop-in bio-resins.

Increasing PCR content in its closures remains an issue, however, she said. “Finding a clean stream of polypropylene PCR has been difficult.”

Seventh Generation refers to the Association of Plastics Recyclers (APR) Design Guide for Plastics Recyclability when designing its packaging and works with its sourcing team to incorporate PCR costs upfront, Murosky said. “PCR may be more expensive,” she added, “but there are other steps to take to reduce costs.”

She said her team works with the company’s marketing team to redefine the bottle aesthetic regarding color and clarity to show consumers that PCR is a priority.

The company’s packaging incorporates the How2Recycle label to encourage consumer recycling. “We need consumers to recycle so we can continue to have a source of PCR,” Murosky said.

Sarah Dearman, sustainable packaging program director for Atlanta-based Coca-Cola provided details on the company’s World Without Waste sustainable packaging vision. She said the company would like to achieve 100 percent recovery of its packaging. “It is an extremely ambitious goal,” she said, “but we can do it with the help of others.

The company also is working toward 50 percent recycled content in its packages. To achieve that goal, it first has to work on increasing recovery, Dearman said. “There is not enough supply to go beyond 50 percent PCR in our bottles.”

She said Coca-Cola is engaging its entire system, from marketing through to its suppliers and bottlers, to reach its recovery goals. “We need game-changing solutions that leverage technology to drive more people to recycle the right way.”

The company has already invested $13 million to help improve recycling through various initiatives, Dearman said. “It’s still not enough as the recycling rate keeps going down for bottles and cans.”